Vertiv under pressure after Microsoft reveals cooling system for AI chips

Shares of Vertiv (VRT) are trading lower on Tuesday after Microsoft (MSFT) said it successfully tested a new microfluidic cooling system for data center chips. The company’s new cooling technology removes heat up to three times more efficiently than cold plates, an advanced cooling method currently used in data centers. Back in July, shares of Vertiv also sold off on similar news from Amazon (AMZN) after the e-commerce giant revealed its own custom liquid cooling system.

MICROSOFT COOLING SYSTEM: Microsoft said on its website, “The chips that datacenters use to run the latest AI breakthroughs generate much more heat than previous generations of silicon. Anybody whose phone or laptop has overheated knows that electronics don’t like to get hot. In the face of rising demand for AI and newer chip designs, the current cooling technology will put a ceiling on progress in just a few years. To help address this problem, Microsoft has successfully tested a new cooling system that removed heat up to three times better than cold plates, an advanced cooling technology commonly used today. It uses microfluidics, an approach that brings liquid coolant directly inside the silicon – where the heat is. Tiny channels are etched directly on the back of the silicon chip, creating grooves that allow cooling liquid to flow directly onto the chip and more efficiently remove heat. The team also used AI to identify the unique heat signatures on a chip and direct the coolant with more precision.”

AMAZON COOLING SYSTEM: In early July, shares of Vertiv were under pressure after Amazon announced that its Web Services unit produced a completely custom liquid cooling system for its data centers in 11 months. The company said, “Klusas’s team considered multiple liquid cooling solutions that could be purchased from vendors but realized none were a good fit for AWS’s needs. That put them on a path of designing and delivering a complete custom system. AWS is taking a direct-to-chip approach, which puts a cold plate’ directly on top of the chip. The liquid runs in tubes through that sealed plate, absorbing the heat and carrying it out of the server rack…It took just four months for AWS to go from a whiteboard design to a prototype, and then 11 months to deliver the first unit in production. That included time to develop designs, build a supply chain, write control software, test everything, and manufacture systems.”

At the time, Deutsche Bank said the selloff in shares of both Vertiv and nVent Electric (NVT) on the Amazon Web Services was overblown. The selloff reflects concerns that AWS is fully manufacturing liquid cooling systems in-house, the analyst tells investors in a research note. However, Deutsche believes liquid cooling suppliers like Vertiv and nVent are working with hyperscalers in their development of proprietary cooling solutions. The firm says AWS designed their own system but does not manufacture it themselves. Deutsche admits that it does not know the specifics about who is working with AWS.

PRICE ACTION: Shares of Vertiv are down 4.5% at $145.15 in afternoon trading.